The annual return of atleast 10% were too good to be true at this time. I would point out only one thing here that is how Mr. Madoff's vague explanations arrived at those results. The way he described his strategy, which involved the simultaneous purchase of stock and sale of option contracts, It was very well noticed that there wasn't sufficient volume in those options trades to account for the reported gains. The best advise that came at this point of time was that we should all turn ourselves into forensic accountants. I am very much sure here that many of the people have lost their savings here. After all, consistent returns in good and bad markets are the selling point for nearly every hedge fund.
Many people have reported much larger annual returns without raising eyebrows. Indeed, Mr. Madoff's returns were good, but not so spectacular as to raise undue suspicion. As for his vague explanations, they were no vaguer than those of many other hedge-fund managers and even mutual-fund managers. Many investors after this examined Mr. Madoff's operation and declined to invest. How that could have happened remains one of the big unanswered questions of this affair. I am sure Mr. Madoff's victims can surely be forgiven for relying on what is supposed to be a watchdog agency.
Let us hear some impacts of Madoff Scandal from bloomberg:
The best advise that comes out here is that never to invest in anything -- hedge fund, partnership, mutual fund, Check your investments for the name of the firm that provides the audit. If you don't recognize it, research it on the Internet. While it's especially hard to reduce an asset that seems to be doing so well. Don't believe anyone who tells you that you can earn higher returns while assuming a lower risk. If you're realizing high returns, then you're also accepting increased risk. Never trust a middleman here. Many of the Madoff investors were reported to be attacked by the middleman which led them into a big trouble. Have faith in human nature sometimes not always. You can better rely on the money managers, some are honest hard-working professionals with their clients' best interests at heart.